Financial Support For Organizations Investing In Rural Health: Congress Establishes $50 Billion Rural Health Transformation Program

Introduction

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (H.R. 1), enacting sweeping policy changes to federal health policy, including significant reductions in Medicaid and Children's Health Insurance Program ("CHIP") spending, which are projected to total $1 trillion over the next decade.¹ The law also creates the Rural Health Transformation Program ("RHTP"), which appropriates $50 billion over five years (FY 2026–2030) to partially offset roughly 37% of the projected reduction in federal Medicaid spending in rural areas, supporting rural health care providers and systems.²

This Alert summarizes the structure and requirements of the RHTP, analyzes its limitations and strategic implications, and provides practical recommendations for health care organizations, investors, and other stakeholders seeking to engage with the program.

Overview of the New Rural Health Transformation Program ("RHTP")

Program Structure and Funding

The RHTP is a temporary, mandatory fund appended to CHIP, with $10 billion per year allocated to states that submit and receive approval for a Rural Health Transformation Plan. Notably, states are not required to provide any matching funds to receive RHTP dollars; however, these funds may not be used for the state share of Medicaid payments, ensuring the money goes directly toward new rural health initiatives rather than routine Medicaid financing.

Funding is distributed in two parts to ensure every participating state receives a baseline infusion of support, while directing additional resources to states with greater rural health care needs:

• Equal Share: Half of the $10 billion per year ($5 billion annually) will be distributed equally among all states with approved RHTP applications. In practical terms, if all 50 states participate, each would receive approximately $100 million per year for five years from this equal-share portion.
• Needs-Based Allocation: The remaining half of the funding ($5 billion annually) will be allocated according to a formula that considers each state's rural population, number of rural health facilities, and the status of hospitals serving a high share of low-income patients. At least one-quarter of states (minimum 12 states) will receive some of this second, needs-based portion.

To access RHTP funds, each state must submit a one-time Rural Health Transformation Plan application to the Centers for Medicare & Medicaid Services ("CMS") by November 5, 2025. The application opened on September 15, 2025.³ Introductory webinars are scheduled for September 15 and September 29, and CMS will provide ongoing opportunities for states to submit questions throughout October.⁴ Following the application submission deadline in early November, CMS will make award decisions by December 31, 2025.⁵ CMS will provide continuous monitoring and support beginning in 2026.⁶ Approved states will be eligible for annual allotments throughout the duration of the program. Given this accelerated timeline, states are moving quickly; for example, North Carolina has already initiated its application process and is soliciting input from providers on what to include.⁷

State Plan Requirements and Allowable Uses of Funds

State applications must present a detailed Rural Health Transformation Plan to improve health care access and outcomes for its rural residents, addressing the eight mandatory elements:

• improving access to hospitals, other providers, and health care services for rural residents;
• improving health care outcomes for rural populations;
• prioritizing new and emerging technologies (telehealth, AI, remote monitoring) for prevention and chronic disease management;
• initiating and strengthening local and regional partnerships to improve quality, financial stability, and best practice sharing;
• enhancing recruitment and training of health care clinicians;
• prioritizing data and technology-driven solutions to deliver care close to home;
• outlining strategies for long-term financial solvency of rural hospitals; and
• identifying specific causes driving closures, conversions, or service reductions among stand-alone rural hospitals.

In addition, states must select at least three categories of "Use of Funds" activities in which to invest:

• evidence-based interventions for prevention and chronic disease management;
• direct payments to providers for health care services;
• consumer-facing, technology-driven solutions for chronic disease management;
• training and technical assistance for technology-enabled solutions (remote monitoring, robotics, AI);
• workforce recruitment and retention with minimum service commitments;
• upgrading health IT and cybersecurity infrastructure;
• assistance to right-size rural health care delivery systems;
• expanding mental health, opioid, and substance use disorder treatment;
• supporting alternative payment and value-based care models; and
• other transformative uses as approved by CMS.

To ensure funds are used for their intended purpose, administrative expenses are capped at 10% of RHTP funds, and states will be required to report annually on how the money is allocated. RHTP funds are subject to significant restrictions: funds cannot be used for new construction, building expansion, cosmetic upgrades, payments for clinical services reimbursable by insurance, lobbying, meeting matching requirements for other federal programs, or supplanting existing state or local funding.⁸ Capital expenditures and provider payments are capped, and additional limitations apply to EMR system replacements, technology initiatives, and clinician salaries for facilities with non-compete clauses.⁹

Despite these restrictions, RHTP funds are not restricted to rural hospitals and may be directed to rural health clinics, FQHCs, mental health centers, or urban referral hospitals involved in rural initiatives. States may also sub-award or contract RHTP funds to eligible partners, such as universities, local health departments, and provider associations, to carry out approved activities.¹⁰

It remains to be seen how each state will prioritize funding among hospitals and other needs, and how transparent CMS and states will be regarding which communities or organizations receive relief.

Strategic Opportunities and Considerations for Health Care Stakeholders

The RHTP presents a strategic opportunity for certain health systems, rural providers, and other stakeholders already investing in rural health to secure funding for transformative projects. Below are key considerations and steps for provider organizations to maximize the potential benefits of this program:

1. Engage Early and Proactively in State Planning: Providers should collaborate with state agencies, rural health associations, and other stakeholders to shape state transformation plans, ensuring that the needs of rural communities and providers are clearly articulated and prioritized. For instance, health systems should begin actively engaging with state officials to help shape their state's RHTP application because states are moving quickly to develop their transformation plans by the end of 2025, and many are seeking input from hospitals and providers on what to include.¹¹
2. Prepare Compelling Funding Proposals: Organizations should identify projects that align with RHTP priorities—such as telehealth expansion, digital infrastructure upgrades, workforce development, and innovative care models—and develop robust business cases demonstrating impact, sustainability, and alignment with state goals.
3. Foster Public-Private Partnerships and Affiliations: The statute explicitly encourages regional partnerships and public-private collaborations to improve rural health care's quality and sustainability. Health systems, academic medical centers, and specialty providers should consider joint ventures, network affiliations, and other models that maximize economies of scale and extend specialist resources to rural areas.
4. Focus on Technology and Workforce Solutions: Given the RHTP's emphasis on technology and workforce development, stakeholders should prioritize initiatives that expand access to digital health tools, remote monitoring, and AI-driven care, as well as programs to recruit and retain clinicians in rural communities.
5. Plan for Long-Term Sustainability: Because RHTP is time-limited relief, its funds should be used as seed capital for lasting transformation, with a focus on projects that reduce ongoing costs or generate new revenues. Stakeholders should be cautious about relying on RHTP dollars for recurring expenses that will leave a funding gap when the program expires.

Footnotes

1. Congressional Budget Office, Estimated Budgetary Effects of Public Law 119-21, to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14, Relative to CBO's January 2025 Baseline (2025), https://www.cbo.gov/publication/61570.

2. Kaiser Family Foundation, A Closer Look at the $50 Billion Rural Health Fund in the New Reconciliation Law (2025), https://www.kff.org/medicaid/a-closer-look-at-the-50-billion-rural-health-fund-in-the-new-reconciliation-law/.

3. Notice of Funding Opportunity, U.S. Dep't of Health & Human Servs., Rural Health Transformation Program, https://www.grants.gov/search-results-detail/360442.

4. CMS, Rural Health Transformation (RHT) Program (last modified Sept. 15, 2025), https://www.cms.gov/priorities/rural-health-transformation-rht-program/rural-health-transformation-rht-program.

5. Id.

6. Id.

7. See, e.g., N.C. Dep't of Health & Hum. Servs., North Carolina to Apply for Rural Health Transformation Program (Aug. 14, 2025), https://www.ncdhhs.gov/news/press-releases/2025/08/14/north-carolina-apply-rural-health-transformation-program; https://www.kff.org/medicaid/a-closer-look-at-the-50-billion-rural-health-fund-in-the-new-reconciliation-law/.

8. Notice of Funding Opportunity.

9. Id.

10. Id.

11. See, e.g., id.